Southern Real Estate Bubble: The New Game of Musical (Overpriced) Chairs

In the wake of the pandemic, the South has seen a surge in new homes for sale, potentially creating a housing bubble. According to a recent analysis by Nick Gerli, CEO of Reventure Consulting, the number of new homes for sale in Southern states of the U.S. has spiked up to nearly 300,000. This figure is even higher than the previous bubble peak in August 2006. Gerli suggests that the COVID-inspired demand led to high prices that are now declining with the dropping demand for homes. Home builders and investors rampantly speculated in this housing market the last 3-4 years.

While some housing economists are suggesting that the housing market may be normalizing after the volatility witnessed during the COVID-19 pandemic, there are concerns about the potential for a major housing downturn in the South. Home prices in states like Tennessee, Georgia, and Florida are 30% overvalued, according to data on the Reventure App. This, combined with the spike in new homes for sale, has created a recipe for a significant housing downturn.

However, it's worth noting that compared to the housing crash seen in the 2008 financial crisis, homeowners now boast significant equity in their homes, including in certain parts of the South. This could potentially cushion the blow of any downturn.

While the housing market in the South is showing signs of a potential bubble, the situation is not as dire as the 2008 financial crisis. The spike in new homes for sale could be a sign of the market normalizing after the pandemic-induced volatility. However, the significant overvaluation of home prices in certain states is a cause for concern and could lead to a downturn in the future.

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Hunter

contributor

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